Northrim Bank launched the Alaskanomics blog to provide news, analysis and commentary on Alaska’s economy. With contributions from economists, business leaders, policy makers and everyday Alaskans, Alaskanomics aims to engage readers in an ongoing conversation about our economy, now and in the future.

Northrim Bank launched the Alaskanomics blog to provide news, analysis and commentary on Alaska’s economy. With contributions from economists, business leaders, policy makers and everyday Alaskans, Alaskanomics aims to engage readers in an ongoing conversation about our economy, now and in the future.

Monday, January 07, 2019

What does the future hold for the Alaska economy?

By Mouhcine Guettabi,

The U.S. economy is convincingly in an expansionary phase, and is nearing peak growth rates for the current business cycle. Job creation has been consistently strong for an extended period, and unemployment rates have now returned to pre-recession levels. Recent stock market volatility has, however, raised questions about the near term outlook for the U.S. and other large economies. The health of the U.S. economy is important for Alaska not just because residents from other states visit Alaska, and purchase goods made in state but the state's most important financial asset - the permanent fund- is widely invested and therefore sensitive to nationwide shocks. During this national economic resurgence, the Alaska economy has experienced multi-year job declines and is in the midst of its longest recession to date. In fact the state was growing slowly even before the drop in oil prices. To be exact, between 2010 and 2015 the Alaska economy grew, on average, at 0.92%. Since the start of the recession, the state lost 1.82% of its jobs in 2016 and another 1.25% in 2017. The graph below shows our forecast between 2018 and 2025 for the state. It is important to note that we assume 60 dollar oil prices and only moderate state government employment reductions. Large budget reductions have the potential to change these outlooks drastically.

We expect employment to decline by 0.8% in 2018 and anticipate positive growth in 2019 equaling 0.793%. Between 2019 and 2025, we anticipate employment growth to average 0.68% per year. We also provide forecasts for Anchorage, Fairbanks, Juneau, and the Matanuska-Susitna Borough.

Anchorage:

We anticipate that the Anchorage economy will track the state as it has in the last decade:

Anchorage grew, on average, at 0.74% per year between 2010 and 2015. Since the start of the recession, Anchorage lost 1.909% in 2016 and 1.30% in 2017. The Anchorage economy is expected to evolve similarly to the state as a whole which is not surprising given that it represents half of the labor market. Specifically, we anticipate growth to average 0.64% per year between 2019 and 2025.

Fairbanks:

The Fairbanks economy is expected to outperform the state for the next few years:

Fairbanks grew, on average, at 0.29% per year between 2010 and 2015. Since the start of the recession, Fairbanks lost 1.58% in 2016 and 0.55% in 2017.We anticipate that the Fairbanks economy will outperform the state between 2019 and 2022 as a result of the boost of activity caused by the F-35 related construction. The average growth between 2019 and 2025 will be 1.062%.

Juneau

Due to its dependence on state government, we expect the Juneau economy to grow slower than the state average.

Juneau grew, on average, at 0.39% per year between 2010 and 2015. Since the start of the recession, Juneau lost 0.27% in 2016 and another 0.96% in 2017.We anticipate that the Juneau economy will grow slower than the state. Specifically, we expect the average growth rate between 2019 and 2025 per year to be 0.08%.

Matanuska-Susitna Borough:

Similar to the last decade, we anticipate that the Matanuska- Susitna Borough will continue outperforming the state.

Matanuska-Susitna Borough grew, on average, at 2.82% between 2010 and 2015. Since the start of the recession, the Matsu grew by 2% in 2016 and lost 0.343% in 2017.We anticipate that the Matanuska-Susitna Borough to continue outperforming the state. Between 2019 and 2025, growth will average 1.22% per year.

Please join us on January 9th when a team of economists will discuss economic forecasts and the role of the permanent fund going forward. Click for more information.